Question

X-Mart uses the perpetual inventory system to account for its merchandise. On May 1, it sold $1,400 of merchandise on credit. The original cost of the merchandise to X-Mart was $500. Demonstrate the required journal entry to record the cost of the sale by selecting all of the correct actions below.
a. Debit Merchandise Inventory $500.
b. Credit Cost of Goods Sold $500.
c. Credit Merchandise Inventory $500.
d. Debit Cost of Goods Sold $500.

Answer 1

Answer:

d. Debit Cost of Goods Sold $500.

c. Credit Merchandise Inventory $500.

Explanation:

The journal entry to record the cost of the sale is shown below:

Cost of Goods Sold $500

      To Merchandise inventory $500

(To record the cost of the sale)

Here the cost of goods sold is debited as it increased the expenses and credited the merchandise inventory as it reduced the assets